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Deal reached on Tesla’s Shanghai factory, reports say

Tesla Model S on the production line at the company's Fremont factory. Source: Steven Jurvetson CC 2.0

Deal for a manufacturing site in Shanghai free trade zone has been reached, the Wall Street Journal reported

After considerable negotiation, Tesla looks set to build EVs in China.

The US car maker has agreed to establish a manufacturing facility in Shanghai’s free trade zone, the Wall Street Journal reported over the weekend, citing unnamed sources.

The deal was first reported in July, when Tesla confirmed it was exploring the possibility of such a facility with local government, but would outline more plans by the end of the year.

Significantly, the facility would be wholly owned by Tesla. No other foreign carmaker has such a deal, and it is unclear what sort of tariffs Tesla may face, although the LA Times has reported that it may accept a 25% tariff on these vehicles, the same level of tariff applied to cars imported into China.

Any such deal would be a milestone achievement for Tesla. China is the world’s largest market for EVs, and has previously only allowed joint ventures with Chinese joint venture partners. Rival EV makers like Ford, GM, Nissan and other have all struck deals to create joint-owned ventures with Chinese firms in order to sell into the market.

As of October 24, Tesla has not commented directly on the report. “We expect to more clearly define our plans for production in China by the end of the year,” said Tesla in a statement via WeChat.

The Shanghai government, meanwhile, told Bloomberg that no such deal had been agreed.

Where the company would source its batteries is another question. Tesla’s US plant is supplied by the Gigafactory, a mammoth battery pack factory in Nevada built in partnership with Japanese firm Panasonic. The latter has recently opened a battery plant in Dalian, should the two look to expand their relationship, but the government may again look to pressure Tesla into using other Chinese suppliers.

While much of the discussion around the factory remains speculative, it looks more and more likely that the company’s first foreign manufacturing venture will indeed be in the world’s largest market. With confirmation now expected by the end of the year, 2017 is shaping up to be Tesla’s biggest 12 months yet.


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One comment

  1. Good n useful information.

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